Ravikant D. Manglani, Godhra V. The DCIT, Central Circle-1, Baroda

ITA 1876/AHD/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6755 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Transfer pricing; Search and seizure; International transaction; Reasonable cause; Procedural lapse
• Section: 132; 273B; 143(3); 142(1); 92E; 153A; 143(2); 271B; 44AB

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] BEFORE S/SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.1876/Ahd/2018 Assessment Year : 2013-14 Ravikant D. Manglani 1, Baharpura Godhra 389 001. PAN : AGJPM 1372 L Vs DCIT, Cent.Cir.1 Vadodara. अपीलाथ / (Appellant) यथ / (Respondent) Assessee by : Written Submissions Revenue by : Shri V.K. Singh, Sr.DR स ु नवाई क तार ख/Date of Hearing : 23/02/2022 घोषणा क तार ख /Date of Pronouncement: 16/03/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the assessee against order dated 11.6.2018 in appeal no. CIT(A)-12/893/CC-1/15-1618 passed by the Ld.Commissioner of Income-tax (Appeals)-12, Ahmedabad [for short “Ld.CIT(A)] relating to the assessment year 2013-14. 2. Solitary issue before us is against confirmation of penalty levied under section 271B of the Act for not furnishing tax audit report under section 44AB of Income Tax Act, 1961 ("the Act" for short). None appeared for the assessee but a written submission was filed by the assessee. 3. Brief facts of the case is that assessee is dealing in land/property and trading in sands/stones. There was search and ITA No.1876/Ahd/2018 2 seizure operation under section 132 of the Act carried out at the premises of Dhanjimama group of cases on 3.7.2012 wherein one of the case of the present assessee was also included. During the course of search, most of the documents, books of accounts, etc. were seized by the Investigation Wing of the Income Tax Department, and investigation continued till end of the financial year. For the Asstt.Year 2013-14, the assessee filed his return of income 3.8.2014 declaring a total income at Rs.1,24,46,720/- including agricultural income (for rate purpose) of Rs.68,390/-. Thereafter, notices under sections 143(2) and 142(1) of the Act were issued and served upon the assessee, and the same were replied by the assessee, and based on that assessment order passed under section 143(3) of the Act on 20.3.2015. The returned income at Rs.1,24,46,720/- was accepted by the department inclusive of additional income of Rs.94,40,275/- offered by the assessee during the course of search proceedings. After finalization of the assessment, the ld.AO has also issued penalty notice under section 271AAB and 271B read with section 274 of the Act. During the assessment proceedings, the ld.AO noticed that the assessee in his return of income filed in response to notice under section 153A of the Act has shown receipt of Rs.1,08,21,181/-. As per the provisions of section 44AB, the assessee is required to get his accounts audited by an Accountant before the specified date and furnish the report within stipulated period. Since the assessee has not filed audit report, a show cause notice dated 20.3.2015 under section 271B of the Act to explain as to why penalty should not be imposed. In response thereto, the assessee vide reply dated 5.8.2015 submitted interalia that pursuant to the search, the return of income was filed by the assessee based on provisional accounts. The assessee could not finalise his accounts because books of accounts and documents were seized by ITA No.1876/Ahd/2018 3 the search party, and were not made available to the assessee for finalization of its accounts, nor any copies thereof were with the assessee. Further, post search investigation, all the documents were with the Investigation Officer, and therefore, it was practically impossible for the assessee to get his accounts audited under section 44AB of the Act, and therefore, looking to the genuine hardship, no penalty under section 271B of the Act be levied. Assessee also relied upon various case laws to support his case. However, the ld.AO did not accept the contentions of the assessee. He levied penalty of Rs.54,106/- being a sum equal to one-half percent of the gross receipts of Rs.1,08,21,181/-. 4. Aggrieved against the same, the assessee filed an appeal before the ld.CIT(A). The ld.CIT(A) confirmed levy of penalty by rejecting the explanation offered by the assessee. Aggrieved against the same, the assessee is in appeal before the Tribunal with the following grounds: “1.00 IMPOSITION OF PENLATY TO THE TUNE OF RS. 54,106/- FOR NOT FURNISHING TAX AUDIT REPORT U/S 44AB OF THE ACT. 1.1 On the facts and circumstances of appellant's case and in law, the Id. CIT (Appeals) has erred in confirming the levy of penalty to the tune of Rs. 54.106/- under section 271 B of the Act by the Id. AO for not furnishing tax audit report u/s 44AB of the Act. While doing so, the Id AO has erred in not appreciating the fact that due to search operations in the Group cases during the financial year, it was humanly not possible to get the accounts audited as during the previous year papers / documents were sejzed by Id AO. Your appellant also states that no discrepancies were notice by the Id AO with respect to details furnished during the course of assessment proceedings. In fact, all details related to various clauses of Tax Audit Report i.e. Form No. 3CD were furnished to the Id AO and the same were accepted as well. This clearly shows that there is merely a procedural lapse on part of appellant of not getting formal Tax Audit Report in formal manner, though all relevant compliances have been made. Not only that, due to seizure if documents in the previous year, it was impossible to prepare proper books of accounts. Your Honour ITA No.1876/Ahd/2018 4 will appreciate that merely because of procedural lapse, the appellant may not be penalized.” 5. As mentioned in the foregoing paragraph, at the time of hearing non-appeared on behalf of the assessee. However, the assessee has filed written submission dated 28.10.2021, which was placed on record. In the written submissions, the assessee interalia pleaded that the figures of Rs.1,24,46,720/- mentioned in the computation part in the assessment order is not correct figure, but actual figure of disclosure is Rs.94,40,275/-. It is further pleaded that the actual nature of disclosure was not known because no such break-up was given and therefore simply this amount cannot be termed as “total turnover or sales”, and therefore, there is no question of applying provisions of section 44AB of the Act. Even otherwise also, there is reason for the assessee not to get accounts audited as per section 44AB, because all the books of accounts and other relevant materials were with the Investigation Team, and they were not made available to the assessee. Therefore penalty under section 271B of the Act is unjustified and unwarranted, and the same is liable to be deleted. 6. On the other hand, the ld.DR while justifying imposition of penalty under section 271B of the Act supported the orders of the lower authorities. 7. We have given our thoughtful consideration in the matter and perused material available on record including the written submissions. Admittedly, during the search and seizure operation, the department has seized books of accounts and other materials. The assessee has filed his return of income on 30.8.2014 wherein he admitted additional income of Rs.94,40,275/- which was accepted by the department without making any further addition, which is ITA No.1876/Ahd/2018 5 not in dispute. The dispute in the present case is against levy of penalty under section 271B for failure to get accounts audited and furnishing of a report of such audit, as required under section 44AB of the Act. To this proposition, we find a parallel decision of the ITAT in the case of Faith Intertrade Vs. ITO in ITA No.356/Ahd/2019 (authored by one of us – Judicial Member herein). The Tribunal in the given set of facts and circumstances, considered validity of imposing penalty under section 271BA read with Section 92E of the Act. The Tribunal held that imposition of penalty under section 273B of the Act is not mandatory, rather it is discretionary, because if the assessee proves that there was a “reasonable cause” for the said failure, then the AO ought to have considered the same and then proceed with levying penalty. The findings of the Tribunal in this regard read as follows: “7. We have given out thoughtful consideration on the issue of levy of penalty under section 271BA of the Act and heard the rival submissions and perused the material available on record. In the facts of the present case, admittedly the assessee failed to upload Form No. 3CEB in terms of the statutory requirement. The Statute requires in terms of Section 92E that the report from an Accountant be filed in regard to the international transactions or specified domestic transactions. The relevant provision reads as under : “Report from an accountant to be furnished by persons entering into international transaction.— "92E. Every person who has entered into an international transaction [or specified domestic transaction] during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed." 7.1 In order to ensure compliance, the Statute has provided imposition of penalty u/s 271BA in case of violation of section ITA No.1876/Ahd/2018 6 92E. The relevant provision is extracted hereunder for completeness: “Penalty for failure to furnish report under section 92E. "271BA—If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees." 7.2. A perusal of the above provisions shows that the Parliament has used the words "may" and not "shall", thereby making their intentions clear inasmuch as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act. A careful reading of Section 273B encompasses that certain penalties "shall" not be imposed in cases where “reasonable cause” is successfully pleaded. It is seen that penalty imposable u/s 271BA is also included therein. By the said provisions, the Parliament has unambiguously made it clear that no penalty "shall be" imposed, if the assessee "proves that there was a reasonable cause for the said failure". As noticed, if the statutory provision shows that the word "shall" has been used in Section 271BA, then the imposition of penalty would have been mandatory. Section 273B as noted further throws light on the legislative intent as it specifically provides that no penalty "shall" be imposed if the assessee proves "that there was reasonable cause for the said failure". 7.3. In the facts of the present case, it is seen that the consistent explanation of the assessee has been ignored. The assessee has pleaded ignorance in regard to the said legal requirement and has demonstrated that the word “Specified Domestic Transaction” was inserted in section 92E by Finance Act, 2012 w.e.f. 01-04-2013 which is applicable for the first time from the assessment year 2013-14. Though the assessee obtained the Form 3CEB from the Chartered Accountant but had failed to up load electronically, as it has not aware about the recent changes and amendments in the provision. Further this being the first year of this new provision it could not upload the same electronically which is neither wilful nor wanton. The assessee has further pleaded that based on the report, no adjustments have been proposed by the TPO. Copy of the assessment order dated 02.12.2016 passed u/s. 143[3] rws 92CA(3) clearly shows that there were no adjustment made by the TPO and the AO accepted the returned income as the Assessed Income. Thus there is no mala fide is found in the above transaction, but only a bond fide mistake of new ITA No.1876/Ahd/2018 7 amended provision is not followed by the assessee. It is further seen that both the lower authorities has proceeded as though the levy of penalty u/s.271BA as automatic, without considering section 273B of the Act.” 8. In the light of the above decision of the Tribunal, if we look at the case in hand, then it would reveal that the assessee has explained before the lower authorities that non-submission of audited accounts was due to non-finalisation of accounts, because all the books of accounts and other relevant materials were seized by the Investigation Wing of the department, and they were not made available to the assessee. The assessee has filed his return of income on the basis of provisional accounts, and such return was accepted by the department. These facts were not denied by the Revenue and attained finality. The ld.AO has simply invoked his discretionary power under section 271B without appreciating the reasons putforth by the assessee for the alleged failure on his part for non-submission of audited accounts. We are of the considered option that the explanation offered by the assessee ought to have been accepted by the Revenue as being sufficient cause. We find force in the submissions of the assessee, and therefore we incline to cancel the impugned penalty. Thus, we delete penalty of Rs.54,106/- imposed under section 271B of the Act, and allow the ground of appeal. 9. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 16 th March, 2022 at Ahmedabad. Sd/- Sd/- (PRAMOD M. JAGTAP) VICE-PRESIDENT (T.R. SENTHIL KUMAR) JUDICIAL MEMBER Ahmedabad, dated 16/03/2022